FedEx Corporation (FDX)

The analysis of FedEx Corporation's liquidity ratios over the given period reveals several notable trends and insights:

Current Ratio:
The current ratio, measuring the company's ability to meet short-term obligations with its current assets, has shown a gradual decline from a peak of 1.76 on November 30, 2020, to approximately 1.19 by May 2025. Historically, values above 1.5 suggest adequate short-term liquidity, but recent figures hovering around 1.2–1.4 indicate a modest contraction in liquidity, implying that current assets are increasingly closer to current liabilities.

Quick Ratio:
The quick ratio, which excludes inventory from current assets and provides a more stringent measure of liquidity, initially spiked to 3.37 on November 30, 2020. Post-2021, the ratio has generally trended downward, settling around 1.10–1.30 in recent periods before a sharp decline to 0.36 as of May 2025. This notable decline indicates a deterioration in the company's ability to quickly meet near-term liabilities without relying on inventory or other less liquid assets.

Cash Ratio:
The cash ratio, representing the most conservative liquidity measure by considering only cash and cash equivalents, has fluctuated significantly. It reached a high of 2.42 on November 30, 2020, then declined markedly to below 0.5 during 2021 and 2022. In recent periods, it stabilized around 0.35–0.37, with a notable downward trend towards May 2025. A cash ratio below 0.5 suggests limited immediate cash resources available to cover short-term liabilities without additional liquid assets.

Overall Observation:
Across all three liquidity ratios, there is a discernible pattern of gradual decline over the analyzed period. This trend indicates a compression in FedEx’s liquidity buffers, potentially reflecting operational, strategic, or market-driven factors that have influenced its ability to maintain high levels of liquid assets. While ratios above 1 generally imply adequate liquidity, the declining values—particularly in the quick and cash ratio—highlight increasing liquidity pressure and a potential need for careful management of short-term obligations moving forward.

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See also:

FedEx Corporation Liquidity Ratios (Quarterly Data)

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Additional liquidity measure

The analysis of FedEx Corporation's cash conversion cycle (CCC) over the period from August 2020 through May 2025 reveals notable fluctuations and a general trend toward improved efficiency before a significant anomaly in early 2025.

Initially, in August 2020, the CCC stood at approximately 36.18 days, with slight increases observed into November 2020 (~36.49 days). By February 2021, the cycle decreased to around 33.32 days, indicating a modest improvement in cash flow management. Throughout 2021, the cycle fluctuated within a narrow range, reaching a low of approximately 29.54 days in August 2021 and a slightly higher of 31.14 days in November 2021. During this period, the company demonstrated consistent efforts to optimize working capital, reflected in the gradual shortening of the CCC.

Entering 2022, a continued decline in the cycle is observed, reaching roughly 28.34 days in February and remaining relatively stable through May at 29.42 days. The trend persisted into the latter part of 2022, with the cycle further diminishing to a low of 25.33 days in August and slightly increasing again to 28.75 days by November. These developments suggest ongoing enhancements in inventory turnover, accounts receivable collections, and accounts payable management, leading to more rapid cash conversion.

In 2023, the pattern of improvement persisted early in the year, with the cycle decreasing to approximately 25.46 days in February and reaching a low of 24.57 days in May. However, a slight increase is noted subsequently, with the cycle elevating again to 25.42 days in August and 26.12 days in November. This indicates a stabilization around the mid-20-day range, reflecting efficient working capital management.

The data for early 2024 continues the trend of relative stability, with the CCC remaining around 24.30 to 26.17 days. However, by May 2024, a modest increase to approximately 30.03 days is observed, followed by a slight decrease to 26.17 days in August and a minor rise to 27.18 days in November. These fluctuations may be indicative of seasonal variations or strategic adjustments in supply chain and payment practices.

The most notable change occurs in early 2025, where the CCC transitions into a negative territory, recorded at approximately -20.17 days in May 2025. A negative CCC signifies that the company is able to collect cash from sales faster than it needs to pay its suppliers, effectively converting cash before settling its payables. While this can be indicative of exceptionally efficient working capital management, the magnitude of the negative value warrants closer examination for potential changes in payment terms or revenue recognition strategies.

In summary, FedEx's cash conversion cycle from August 2020 through 2024 shows a consistent trend of cyclical improvement, reflecting enhanced operational efficiencies and working capital management. The emergence of a negative CCC in May 2025 marks a significant shift towards a very efficient cash conversion process, although it warrants further analysis to understand underlying causes such as changes in supplier payment terms or operational strategies.